A Tax Credit for a Vehicle Donation
Donating
a car to charity’s often one of the easiest ways to get it out of your
driveway. While your donation won’t net you a tax credit – a
dollar-for-dollar reduction on your tax bill – it may net you a
deduction, which reduces your taxable income. To get a deduction for a
vehicle donation, you’ll need to forgo the standard deduction and
itemize your deductions – which may not be worth it if you don’t have
enough deductions. You’ll also need to follow the IRS’s rules about the
donation.
Qualifying Charity
If
you want to claim a donation, you’ll need to be sure the organization
to which you give your car qualifies as a charity under IRS rules. Many
third-party auto brokers handle vehicle donations for charities, which
complicate your donation: If the broker provides a portion of the
vehicle’s sales value to the charities, you’ll only be able to claim
that amount. If they operate under a flat-fee basis, in which they keep
all sales proceeds and provide the charity a payment to use its name,
you may not be able to claim the donation at all. If you donate directly
to an organization, it must be a qualifying 501(c)(3) charity. The IRS’
Select Check Tool allows you to determine if an organization qualifies
to receive tax-deductible charitable donations.
Value of Deduction if Sold by Charity
You
may claim up to $500 in value for your donated vehicle without any
additional confirmation from the charity. If you want to deduct more
than that, you can’t claim the vehicle’s fair market value as determined
by Kelley Blue Book or a similar price database if the charity sells it
to raise funds. Instead, you may only claim the amount for which the
charity sold it. If the charity sells the vehicle drastically below the
market value, you may still claim up to the $500 valuation limit,
according to Bankrate.com.
Value of Deduction if Used by Charity
If
you donate a vehicle to a charity and it uses it in as an asset – for
example, if a meals-on-wheels program uses your old car to deliver meals
– you may claim the fair market value of the vehicle as your deduction
amount using Kelley Blue Book or a similar valuation database. This
value may be claimed even if the charity uses the car, then eventually
sells it for less than fair market value.
Confirmation of Sale or Receipt
The
charity must provide you with a written receipt 30 days after it
receives the vehicle if it intends to use it in its operations, or 30
days after it sells it. Even if you valued the donation at $500 or less,
you must receive a receipt in order to claim the deduction. If the car
is sold, the amount of proceeds the charity received on the sale is
reported on your receipt, which is the value of your deduction.
articel source : https://finance.zacks.com/tax-credit-vehicle-donation-4011.html
0 Comments